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US New Home Sales Rise Faster than Forecast in April

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US New Home Sales Rise Faster than Forecast in April

The sale of new US homes rebounded sharply in April, supporting the view the housing market was recovering at the start of the second quarter.

New US home sales increased 6.4 percent in April to a seasonally adjusted annual rate of 433,000, the Commerce Department reported today in Washington. That follows a revised gain of 407,000 the prior month. A median estimate of market analysts called for 425,000.

New home sales are used to gauge the underlying performance of the economy. Because home buyers spend money on furnishings, higher home sales are typically associated with higher demand for goods and services.

New home sales represent approximately 7 percent of the residential real estate market.

The median sales price of a new US home sold in April was $275,000, down from $290,000 the prior month. The average sales price was $320,100, official data showed. There were 192,000 new homes for sale at the end of April. At the current sales rate, this represents a supply of 5.3 months.

New home sales are the latest sign the housing recovery was gathering pace after a weak first quarter. The National Association of Homebuilders reported on Thursday that existing home sales increased 1.3 percent in April to 4.65 million, rebounding from a 20-month low of 4.59 million. That was only the second time in nine months existing home sales increased.

Last week the Commerce Department reported the biggest monthly increase in building permits in nearly six years. Building permits, which are used to gauge residential construction intentions, advanced 8 percent in April to 1.08 million. Housing starts accelerated 13.2 percent to a 1.072 million pace in the same month, the highest level since November 2013.

The April data suggest home buyers took advantage of declining mortgage rates and lower house costs. An improving labour market, supported by the biggest monthly advance in nonfarm payrolls in more than two years, was also a factor.

US employers added 288,000 private payrolls in April, as the unemployment rate dropped from 6.7 percent to 6.3 percent. A stronger labour market, it is hoped, can help reverse the broad slowdown in the housing sector that began in the middle of 2013.

The housing slowdown has weighed on builder sentiment as well. The National Association of Home Builders’ Housing Market Index, a gauge of builder confidence, fell in May to its lowest level of the year. Confidence was dragged down by weak sales and expectations of a modest recovery.

The minutes of the April 29-30 Federal Open Market Committee policy meetings, which were released earlier this week, revealed officials were concerned about the housing recovery. Officials cited affordability challenges and construction bottlenecks as some of the major areas of concern. The April data, by and large, suggests the market was moving in the right direction after an unusually harsh winter weighed on activity.

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